Open Letter to the Arizona Corporation Commission and Arizona Public Service Company UPDATED 3:15am 7-11-15

Dear Commissioners and APS:

I am writing to comment on the ongoing and dismaying news from the Arizona Corporation Commission (ACC). This letter is also directed to Arizona Public Service, in particular its lobbyists, lawyers and regulatory specialists.

The current drama pretends there is an actual issue as to whether a Corporation Commissioner can ask a utility whether it spent money on a Commissioner’s election. [see notes at end of this blog post] Of course the Commission can ask APS how much money it spent on Commission elections. It’s stunning that not one of the five sitting Commissioners dares to ask APS that question.

The July 7, 2015 YS item titled The Power of the Regulator [excerpted below] turns itself inside out to explain why ACC regulators do not have this authority.

Commissioner Bob Burns, who at one time had the courage to ask APS how much it spent on anti-solar publicity, suddenly has cold feet. Could it be because APS spent money on Commissioner Bob Burns’ election? Could it be that APS would again spend money on Commissioner Burns, provided he does not ask difficult questions?

Back in the late 1980’s and 1990’s, then-Commissioner Renz Jennings forced APS to open its books. Despite the YS’ tortured logic, the ACC clearly has the power to ask APS what it, ahem, spent on ACC elections.

The hypocrisy and disconnect are jaw-dropping as APS, Salt River Project (SRP) and Tucson Electric Power (TEP) pull out all the stops to slow or kill rooftop solar and get rid of the energy efficiency standard. Arizona rated a lousy 8th in U.S. solar installations in the third quarter of 2014, behind the “sunny” states of New York, New Jersey and Massachusetts.

Regulatory capture in Arizona is in-your-face obvious. Now that the “free market” favors solar, they don’t want solar to be too free. APS and its bought and paid for "regulators" clearly believe it's better to send $2-billion-plus out of state each year to buy coal and natural gas.

So it goes in climate-denying, solar-bashing Arizona.

Unfortunately, this is happening in many other states, not just Arizona. Duke Energy, which funds Arizona State University’s Utility of the Future, is dominant in three of the four states in the U.S. that have still outlawed “no-money-down” (also called third party) solar.

One is Florida, the Sunshine State, which has virtually no solar. Another is North Carolina, where Duke Energy is trying to kill the existing wholesale solar market, keep third party sales illegal and crush the current Renewable Energy and Efficiency Portfolio Standard. These anti-solar bills are being pushed by former Duke Energy employee and current North Carolina State Representative Mike Hager.

On the question of demanding APS disclose its political spending, the YS quotes Corporation Commissioners saying “the future is all that matters.”

I couldn't agree more. Well, on the fact that we need to take charge of what we are doing to our home planet anyway. Unfortunately, today’s actions – refusing to shut down some of the dirtiest power plants in the U.S. (like the Navajo Generating Station), ignoring and downplaying the many benefits of solar, choosing which regulators APS will allow to be “elected” with lots of ratepayer generated campaign money – do not bode well for the future.

The time to dig a well is before you are thirsty. Of course, regarding water, this is playing out in living color in California.

Where solar is not suppressed by incumbent utilities, the economic benefit to those states is huge. In North Carolina, solar tax credits have generated $1.54 in state revenue for every $1.00 credit given. And every $1.00 spent on solar tax credits has paid back ten-to-twenty times more in economic activity. Yet, Duke Energy is working overtime to kill solar’s expansion.

North Carolina’s current Governor, Pat McCrory, worked for Duke Energy for more than 25 years. And guess who put a lot of money into McCrory’s campaigns? McCrory has since made key cabinet appointments from long-time Duke executives with government watchdogs warning of unprecedented conflicts of interest in state government, most shamelessly on the NC utilities commission.

APS, Duke Energy, Salt River Project, Tucson Electric Power, the Edison Electric Institute and many U.S. utilities currently suffer from the same fate: solar can eat their lunch because a small drop in sales results in a much larger reduction in profits. In an era when few were paying attention, utilities built far too many big power plants. Now they want to keep making a 10% yearly rate of return on these $1-billion-plus power plants – which doesn’t include fuel costs or all the costs of pollution clean-up, which are enormous. (In the case of nuclear, each new plant now costs $10 billion.)

Utilities don’t appear to care about climate change, or the self-destruction of burning coal to make electricity for air conditioning.

Every ton of coal burned creates 2.8 tons of the powerful greenhouse gas, carbon dioxide. Thus elevating the need for more, um, air conditioning. Cha-ching, cha-ching go the utilities’ cash registers, while roads literally melt, rivers and lakes dry up, and forests go up in flames.

Never mind that coal plants in Arizona could be easily and cheaply replaced with solar and wind, or that Arizona has some of the oldest, dirtiest coal plants in the Western United States.

In closing: just days ago, I received an email from ACC attorneys asking for permission to access to my emails and text messages (on taxpayer-funded devices from when I served with Commissioner Newman). I told them I believe all my emails and texts should be public record. I understood then, and continue to believe now, that anything I wrote using my taxpayer-paid phone or computer was public record.

I find it truly disturbing that the ACC has made such poor decisions about coal, solar and electricity; that Arizonans are ill-served by arrogant and devious utilities; and that sitting Commissioners have benefited from APS’ dark money.

Arizona’s solar future, once so bright, at least for the moment, is dimmed by captured regulators.

Nancy LaPlaca, J.D., served as Policy Advisor to Commissioner Paul Newman from 2009-2013. She currently is Senior Energy Analyst at www.ncwarn.org, working on climate and energy policy.

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From the July 7, 2015 Yellow Sheet Report: (paragraph divisions added for readability)

Two years ago, [Commissioner Bob] Burns compelled APS, TEP and other regulated utilities to provide a full accounting of how much they had spent on PR and lobbying efforts over net metering. He extended the same invitation to solar providers, which the commission doesn’t regulate (YS, 10/30/13). 

As a result, the public learned that, by November 2013, APS had spent $3.7 million while rooftop had forked out $336,000 in the net metering fight. Burns’ request was made as commissioners were preparing to rule on a policy decision. But questions remain about this power: Can a commissioner ask APS or other regulated utilities for information while there is no policy decision before the commission? And can a commissioner compel a regulated utility to account for its election-related spending, particularly in the commission races, if those funds came from the company’s profits? 

Finally, can a commissioner do it alone without the express backing of the commission’s majority? The powers to inspect a regulated company’s books stem from Section 4, Article 15 of the Arizona Constitution, and ARS 40-241, which both define the powers of the Corp Comm. The constitutional provision says the commission and “the several members thereof” have the authority “to inspect and investigate the property, books, papers, business, methods, and affairs” of publicly traded corporations and regulated utilities. Additionally, the Corp Comm and its members are vested with court powers to compel witness attendance or issue subpoenas. 

This broad authority is reflected in ARS 40-241, which says the commission and “each commissioner” have the authority to, “at any time, inspect the accounts, books, papers and documents of any public service corporation.” A source who is familiar with the Corp Comm said one legal theory is that these powers ultimately emanate from Section 3, Article 15 of the Constitution, which gives the Corp Comm the sole authority to set “just and reasonable rates.” Under this theory, the Corp Comm may inspect regulated companies’ accounts but only insofar as they relate to the setting of rates. 

In short, the request for information has to have a direct tie to an ongoing rate case or pending policy decision before the commission. Rate-setting is based on the cost of delivering a service (in this case, electricity) plus a return of return. In practice, it falls on the regulated utility to show what the cost is of running its service, which it is entitled to recover. But any profits gained by the utility from its return of return are, under this theory, no longer part of the rate-setting scheme. 

Under this view, the Corp Comm has no control or influence over how a utility spends or deploys its profits. So, if Pinnacle West uses its profits to influence the Corp Comm races, commissioners presumably could not compel the disclosure of that spending. But the source also noted that there’s nothing explicitly written in either the Arizona Constitution or in statutes that limit the commission’s inspection or subpoena powers by tying it to a rate case or a pending policy decision. Additionally, a commissioner could very well insist that the authority to inspect the books of a regulated utility can be made at any time. 

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The Yellow Sheet Report is a gossip publication that bends the rules of journalism by, among other things, making claims and citing sources that it refuses to disclose. In this case, it sets forth an argument that comes from "a source with knowledge of the" ACC but clearly runs counter to the history of the Arizona Constitution which established the commission to protect the PEOPLE from heavy-handed exploitation by corporate interests. 

Perhaps because the YS audience is largely made up of plutocratic interests that form what wants to be and possibly IS an invisible shadow state government, that publication is not shy about promoting an interpretation of ACC authority that has neither been validated by any court of law nor by a plain reading of the text.

Given the power of suggestion, do the editors and writers of the YS explicitly intend to embolden readers to challenge the law and conduct themselves contrary to the best interests of ratepayers and citizens?

UPDATE               UPDATE               UPDATE               UPDATE

Doesn't it strike you as peculiar that the administrative head of the Arizona Corporation Commission needs to ASK permission, of a person who has not worked there for the last two and a half years, to access emails and text messages?

What kind of government agency doesn't establish from the START of employment and the beginning of an elected commissioner's term that ALL messages on any taxpayer-funded or paid for device is PUBLIC RECORD and must be preserved?

How long ago was it that ACC outside counsel David Cantelme was telling us that text messages don't have to be preserved? Yet, the ACC has asked a former policy advisor, who left ACC employ in January 2013, for permission to access text messages and email?

Why the contradiction? Might Cantelme have lied to the media and to counsel for the Checks and Balances Project? Just sayin'.